Local

‘Tax guzzlers:’ Developer tax breaks a defining issue of Johnson County’s elections

When the $2 billion Brookridge Golf Course redevelopment was first proposed for Overland Park, resident Stephan Glentzer showed up to city meetings with a cardboard sign. It read, “No TIF, no OP taxes.”

Five years later, he’s still carrying the same sign.

After years of going back to the drawing board, a new iteration of the massive project is crawling through City Hall. And this time, the developer — looking to build luxury apartments, offices and retail northeast of Interstate 435 and Antioch Road — is requesting more than $200 million in TIF money, or tax increment financing, and other tax breaks.

“I’ve been opposed to this from the beginning. Where is the responsibility behind this? We’re here to take care of the citizens, not developers,” said Glentzer, a 3rd Ward City Council candidate running in Tuesday’s election.

Tom Carignan also is vying for the seat that will be left vacant by longtime Councilman Dave White, who is retiring.

Glentzer is among a slew of newcomers running across Johnson County who have made local tax giveaways one of the main talking points of the Nov. 5 election. An influx of candidates are opposed to doling out public tax dollars, saying the money — that could be used for schools, roads and other priorities — has not been used responsibly.

But others argue that incentives can revitalize stagnant areas, such as downtown Overland Park, and spur economic development by bringing jobs and new businesses.

The newfound, or at least much louder, opposition to tax breaks follows a heated election in Kansas City this past spring, which included a citizen-led attempt to reduce developer tax incentives. The measure aimed at capping incentives was rejected by 66% of Kansas City voters, but Mayor Quinton Lucas continues to tackle the issue.

In addition, the state of Kansas has been under fire for giving away roughly $1 billion in tax breaks every year. Kansas lacks the guidelines many states use to determine what projects deserve tax credits or exemptions. And earlier this year, lawmakers called for a comprehensive review of state incentive programs.

Now more voters and candidates throughout Johnson County are demanding greater oversight of local incentives, especially as the population grows and cities compete over new development.

Candidates are calling for reform in such cities as Shawnee and Olathe, which are both working to redevelop their downtowns and cater to a younger demographic.

But the issue is most noticeable in the county’s largest city, as candidates argue Overland Park’s policy for offering tax breaks is being ignored. And the race has heated up as council members stare down one of the largest, and most controversial, incentive packages.

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The Brookridge Golf Course Could be redeveloped to include a grocery store, retail, apartments and offices. Curtin Property Co.

Do developers run the show?

Several residents complain the Overland Park City Council will hardly ever turn down an incentive agreement — a sentiment brought into the public conversation in large part by 5th Ward Councilman Faris Farassati.

Farassati, who is up for reelection this year, is often the lone voice on the Council disapproving of incentive deals, sometimes backed by Councilwoman Gina Burke. He prides himself on “not being bought” by developers, or as he calls them, “tax guzzlers.”

In Overland Park last year, $2.5 million in tax money subsidized development projects that have been given tax breaks or are supported by city debt. Around $1 million in new tax dollars — that otherwise would have funded schools, libraries or infrastructure —was redirected to developments last year.

Claiming business interests have a strong hold over the city, Farassati has loudly objected to other candidates’ acceptance of campaign contributions from development firms and attorneys. Two major law firms, Polsinelli and Lathrop Gage, for example, have poured thousands of dollars into local candidates. Attorneys with both law firms refused to be interviewed.

“Council members should recuse themselves from decisions if they have gotten donations from developers and there is a conflict,” voter Mary Coffman said.

Farassati’s opponent, Phil Bressler, is one of those candidates receiving funds from development interests. But many argue donations do not result in handouts.

Bressler said Overland Park has been “very responsible with the use of tax incentives and weighs each situation based on its individual merits.” He pointed to the Sprint campus and other incentive-fueled developments that have brought jobs and new tax dollars to the city.

Carignan shares a similar view, saying he will look at each incentive deal on a case-by-case basis. He said he will only approve tax breaks for projects that are carefully vetted and deemed eligible.

But with many newcomers on Farassati’s side of the argument, he believes it could be a “historic election, expecting anti-incentive candidates to win several seats.

The Council must have a super majority, or nine “yes” votes out of 12, in order to approve TIF deals. Other incentives only require a simple majority.

“The balance is going to shift, not all the way, but it’s going to shift,” Farassati said.

What’s the return on investment?

Proponents of incentives point to the redevelopment of the Cherokee South Shopping Center, at the southwest corner of 95th Street and Antioch Road, as a clear example of how incentives should work.

The $23 million redevelopment revitalized the shopping center with restaurants, retail and a grocery store, anchored by Walgreens. Through a TIF deal, the developer is receiving a 100% reimbursement on new property taxes and a 50% reimbursement on new sales taxes.

“That area was just languishing and sad, but we got that fixed up and it’s regenerated. A Hy-Vee has come in and that’s fantastic,” said 1st Ward incumbent Terry Happer Scheier.

Incumbent Paul Lyons, representing the 2nd Ward, argued Overland Park would be at a competitive disadvantage if it did not offer incentives to companies looking to relocate. Many emphasized developments that have brought thousands of new jobs to Overland Park, such as the Sprint campus and Black & Veatch headquarters.

Fred Spears, 4th Ward incumbent, highlighted the new office buildings at CityPlace, off of U.S. 69, south of College Boulevard.

“That ground was vacant for decades and in 2018 paid $17,570 in property taxes,” Spears said. “With the investment, the property will soon be paying $110,000 annually in property taxes, plus providing a building with Class A office space, attracting a quality employer offering high quality, high paying positions.”

Several incumbents said Overland Park’s downtown could not have been redeveloped without incentives. The improvements made to older parts of the city are hard to ignore.

“That area is undergoing revitalization, bringing jobs (such as the Edison project), and increases to the city’s tax base over and above the current property evaluations,” 6th Ward incumbent Rick Collins said.

Donna Ginther, an economics professor at the University of Kansas, said it’s hard to say for certain what return on investment cities receive when offering tax breaks.

“I don’t think incentives are well understood. I think these companies have created an expectation that they’re going to get incentives, and then nobody knows exactly what the impact of those incentives turns out to be,” Ginther said. “So it’s really an open question.”

While many argue certain development could not occur without incentives, she said it’s impossible to be sure, especially in Kansas’ richest, booming county. One of the standards for offering TIF reimbursements, for example, is that the area must be blighted.

“I can see how projects that have been given incentives in the downtown have affected that area. But I didn’t really consider it to be a blighted area,” said newcomer Holly Grummert, who is challenging Happer Scheier. “I feel like the incentives have gotten out of hand. And it’s hard to justify anywhere in Overland Park being blighted.”

Critics of incentives argue tax dollars could be better spent elsewhere, such as repairing infrastructure or funding school districts. Mark Tallman, with the Kansas Association of School Boards, said Kansas’ school funding formula protects districts more than other states from being robbed of tax dollars due to abatements.

But still, in 2017, around $1.6 million in property taxes otherwise due to the Blue Valley school district were abated or redirected for tax breaks, according to a study by corporate welfare watchdog Good Jobs First. Shawnee Mission and Olathe school districts did not disclose their figures.

What deserves tax breaks?

For many, the Prairiefire development, along 135th Street between Nall and Lamar avenues, shows the need for greater oversight of incentive programs — both locally and statewide.

In 2012, Overland Park issued nearly $65 million in Kansas sales tax revenue, or STAR bonds, for the Prairiefire retail and entertainment development. Prairiefire has paid back only a small amount of the original principal, leaving a $64.8 million outstanding balance after seven years. The City Council also approved a community improvement district for the development, allowing the site to charge an additional 1.5-cent sales tax.

As the state reviews its guidelines for determining what projects are actually eligible to receive STAR bonds, some candidates are calling for the city to undergo a similar review of its own incentive programs.

“The failure is with Overland Park City Council not setting up more stringent standards in its policies and its development agreements. Overland Park needs an independent third party analysis on all developer estimates,” said newcomer Dan Osman, who is challenging Spears in the 4th Ward.

He also criticized the city allowing the Bluhawk development, which includes a multisport and hockey arena, to apply for STAR bonds without a more thorough, unbiased economic analysis.

“Taxpayers should not be expected to contribute tax incentives to construct an ice hockey arena that will primarily benefit its corporate owners and only a small segment of residents,” said newcomer Roger Tarbutton, who is running against Lyons.

Kevin Walker, with the Overland Park Chamber of Commerce, argued the city takes a targeted approach when approving incentives, and many development proposals never reach City Hall because they do not meet standards.

Opponents have argued Overland Park is giving tax breaks to the wrong projects.

“The original idea of publicly financing private projects was designed solely to assist in cleaning up blighted areas,” said Scott Hamblin, who is challenging Collins. “Overland Park and elsewhere it has since morphed into a lobbyist controlled way for corporations to take advantage of the city leadership and taxpayers for projects the concept was never intended to be used.”

Even the strongest opponents of tax breaks said they are sometimes beneficial, though. Farassati, for example, was in favor of an incentive deal for Metcalf Crossing, emphasizing the need to rid the site of blight and demolish two dilapidated, crime-ridden hotels off Shawnee Mission Parkway.

But that project brought plenty of its own controversy, as plans dwindled down from a new hotel to a car wash and storage facility. Many have questioned what sort of developments should receive tax breaks.

City leaders have made it a goal to attract more office space to the city, which some newcomers have criticized, saying they see “for rent” signs cluttering vacant office buildings already.

Many have spoken out against the use of incentives for luxury apartments, a common occurrence despite a lack of affordable housing. More than 600 people are on the now-closed waiting list for Section 8 vouchers for low-income housing in Johnson County, according to county spokeswoman Lori Sand.

Others have criticized the use of incentives to bring more retail to Overland Park, when big box stores struggle nationwide and local cities continue to see shrinking sales tax revenue.

And some have said closer oversight of tax dollars is needed while property tax revenue is threatened. Johnson County’s municipalities have been fighting big box chains over how commercial property is assessed. Their ongoing disputes making their way through Kansas courts threaten as much as 30% of county property tax revenue.

Is reform needed?

Mayor Carl Gerlach called it a “new age” for Overland Park when in 2015 the City Council approved a stricter policy for incentives, aimed at giving more taxes back to schools, the county and libraries.

The policy states the City Council will favor tax increment financing in older parts of the city and for projects where developers keep no more than 90% of new taxes.

“We were all over the place prior to the policy. We were trying to set some standards,” said White, who helped craft the guidelines. “Some people follow it. Some people don’t. And for the most part, developers have been pushing the envelope quite a bit.”

Readying for retirement, White said it’s important for the Council to consider each project individually, plus look at the broader picture of development. Now that the downtown has been revamped, for example, White said he likely would not continue to offer incentives to developers wanting to build in that area.

“Do we need more retail? Do we need more apartments? I think there’s a division of opinion there,” he said. “But I think where I’ve changed over the years is, we’ve now gotten what we want in downtown Overland Park. Should the next people to come in get the same incentives as the people that took the risk? I don’t think they should.”

Opponents have called for the city’s policy on tax incentives to be reformed, arguing the policy has done little to curb the use of incentives.

Brookridge will be another test.

The developer is requesting a 100% reimbursement of new property taxes created by the project. The development agreement calls for a cap of $158.5 million in property tax reimbursements, plus $46.5 million from an extra sales tax. A portion of the tax breaks would be used to fund a parking garage, plus private and public infrastructure improvements at 103rd Street and Antioch Road.

The Council scheduled a public hearing on the project for Dec. 2 — after the election.

Star reporters Kevin Hardy and Steve Vockrodt contributed to this report.

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Sarah Ritter covers Johnson County for The Kansas City Star. Formerly a reporter for the Quad-City Times, Sarah is a graduate of Augustana College.
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